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good question. if you can just step away from the concept of government employment for a second i can explain. here is somebody an employer, that needs a public whipping boy badly- somebody that everybody can blame their stuff on, a cop, a teacher a social worker. somebody with a big sign hanging saying its all about me. mr public, you never did anything wrong you are a great person your behavior is wonderful. im so sorry that my stupid face got in the way of your swinging fist. . gov employees do this circus clown show for 30 years, why? promise of early retirement and a good pension. a few make it, most do not, most quit go crazy or drop dead on the job.
and that my friend thats what makes the horsey trudge on for 30 years after that carrot. nobody describes what these individuals are like after they retire better than ann rice, interview with the vampire.

Taxation of Social Security Benefits NewToCA wondered about the possibility of tax laws being "changed" to tax, say, 80% of Social Security benefits. Well, depending on one's income outside of Social Security, 85% of them are already taxable and have been since the 1984 tax year. People who derive most of their income from Soc. Sec. are protected by income triggers which, interestingly, have not been adjusted for inflation since they were created in the 1983 legislation. It works roughly like this: take half your Soc. Sec. income and add in ALL other income (earned or not). If the amount is over $25,000 for individual filers or $32,000 for married filing jointly, then some tax is triggered, increasing to 85% of benefits taxable at some higher level which I've forgotten (but it's not really all that high). I doubt that it would ever fly politically to tax everybody's benefits, because then you would impact people who are practically eating dog food just to survive. (Yes, there are more than a few people who live on Social Security alone.) Many individual states do not tax Soc Sec. benefits at all, and some give a tax break to other pension income.

Taxation of Social Security Benefits NewToCA wondered about the possibility of tax laws being "changed" to tax, say, 80% of Social Security benefits. Well, depending on one's income outside of Social Security, 85% of them are already taxable and have been since the 1984 tax year. People who derive most of their income from Soc. Sec. are protected by income triggers which, interestingly, have not been adjusted for inflation since they were created in the 1983 legislation. It works roughly like this: take half your Soc. Sec. income and add in ALL other income (earned or not). If the amount is over $25,000 for individual filers or $32,000 for married filing jointly, then some tax is triggered, increasing to 85% of benefits taxable at some higher level which I've forgotten (but it's not really all that high). I doubt that it would ever fly politically to tax everybody's benefits, because then you would impact people who are practically eating dog food just to survive. (Yes, there are more than a few people who live on Social Security alone.) Many individual states do not tax Soc Sec. benefits at all, and some give a tax break to other pension income.

I think he is talking about means testing and a resulting tax RATE of 80% on SS If you have resources over X dollar amount.

I was combining two different concepts in the single posting, but both relating to the overall topic of penalizing those who are financially diligent and thrifty.

My thinking was a combination of significantly modifying the current tax exclusion for social security, and replacing it with something on the order of making 80% of it taxable, regardless of income. I was also thinking about (but likely didn't communicate very well) the potential future modifications in our tax structure that would result in "de-facto" means testing of social security, not through lessening the benefit itself but rather through confiscation via the taxation process.

Oddly, subsequent to that posting, the new health care law seems to provide some initial oommph to my concerns, potentially slapping a "Medicare" type of tax on high level of earnings. I'm not clear if social security would currently be exempt from this tax, but if so I can easily see it being included for the "high income" group.

Thanks for the clarifications. "Confiscation" is way too strong a word for any current taxation issue, but you are worried that it could get to that point in the future, right? While no one can know what is going to happen, I just don't imagine things getting that radical. I can see the income cap on payroll taxes being raised or even lifted entirely, but that will hardly be confiscatory. That adjustment is probably less painful than a general increase in the payroll tax rate or a further increase in full retirement age. Some such tweaks to Social Security, perhaps a combination of them, will be necessary sooner or later, and the sooner they occur the less radical they will need to be. Of course I have narrowly focused these remarks on Soc. Sec., but the overall tax picture is much broader, and obviously the trend will be toward higher taxes, not lower, which is precisely your concern.

While lifting the payroll tax ceiling may not be confiscatory, adding in an increased federal tax rate, increased Medicare contribution rates and some states with high income tax rates (such as Wisconsin, New Jersey, Oregon or California) could make it a pretty close call for those self employed.

Thanks for the clarifications. "Confiscation" is way too strong a word for any current taxation issue, but you are worried that it could get to that point in the future, right? While no one can know what is going to happen, I just don't imagine things getting that radical. I can see the income cap on payroll taxes being raised or even lifted entirely, but that will hardly be confiscatory. That adjustment is probably less painful than a general increase in the payroll tax rate or a further increase in full retirement age. Some such tweaks to Social Security, perhaps a combination of them, will be necessary sooner or later, and the sooner they occur the less radical they will need to be. Of course I have narrowly focused these remarks on Soc. Sec., but the overall tax picture is much broader, and obviously the trend will be toward higher taxes, not lower, which is precisely your concern.

i probably didn't get my point across properly in the op, but what i really wanted to know is how behaviour might be different if we didn't have the "bailer-outer-in-chief". if that was the case would more or less people have a plan b and c? would we be more or less inclined to spread out our risk? (when i say spread out our risk i'm not only referring to dollar income related investments)

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